A scratched CD cannot be copied, but can be viewed by VLC or jetAudio - how?

I've a badly scratched VCD whose content can't be copied to hard disk. My OS is Windows 7 Ultimate x64. Windows can't copy the 750 MB video file. I also tried CDCheck and Recover Disc. Both of them are terribly slow to copy the content as there are too many scratch and thus too many read errors. For example Recover Disc was able to store only 6% after 1 hour. As the copying was taking so long time I didn't finish it.

Surprisingly, the video file can be viewed smoothly by VLC or jetAudio. I don't understand - if there are too many scratch on the CD so that Windows and other software can't copy it, how the media players are able to play it? If they can play it, the content should be recoverable. How can I recover it (copy it to hard disk)?

Since your question seems more to be 'How can this be' (and not "How can I copy this disk") I'll try to answer to that:

When viewing video it's OK to skip/drop corrupted frames, similarly this also applies to audio.

They can get away with this because your brain can make up the difference (in minor cases) so it still appears fine to your eyes/ears. Even noticeable corruption, like a few funky frames/scenes/artifacts, still doesn't render the video 'unwatchable' (you can still comprehend what's going on).

But, when you try to copy the file, it wants to copy all those bits, exactly as they appear, regardless of the content.

If some of those bits are corrupted in a non-readable way then it can't 'copy' it, and so the job of copying it fails.

As to recovering/copying it, I think you've got what you need, you just need to wait. For example, when a colleague of mine was recently recovering video from a scratched DVD-R (which played fine, but he needed a copy of it), similarly to what you say you tried with Recover Disk, it took multiple DAYS for it to finish up and give him a version he could view and copy.

If you can play the video with VLC, you should also be able to dump the video as it is played.

One way to do this is to go to: Media -> Convert/Save, select the video file, choose "Convert", enter the destination, and select "Dump raw input".

You can try CopyCat, it has features designed to work on heavily damaged media.

Another option would be a CD/DVD repair kit. They sand down the surface of the optical media to an even level, then buffs it smooth. Ive used the Skip Doctor before and can say it works.